Bidvest has released its first results since unbundling its food division into separately listed Bidcorp in May.
The previous year’s figures were restated, with the divisions now housed in Bidcorp accounted for as discontinued operations.
The smaller group says revenue for the year to end-June grew 3.5% to R91.8bn but aftertax profit for the year from continuing operations fell 28.5% to R2.4bn.
A final dividend of R2.32 was declared, taking the dividend for the year to R7.14. Although down from the previous year’s R9.09, the company says this “needs to be viewed in the context of the interim dividend of R4.82 which was paid as part of the larger group, prior to unbundling”.
CEO Lindsay Ralphs included in his commentary an appeal for an end to disruption of key economic institutions.
“As one of SA’s largest employers and a significant investor in the local economy, Bidvest shares the concerns that have been raised by business leadership relating to the ongoing disruption of some of our country’s most important economic institutions. We appeal for a rapid resolution of this current state of affairs.”
Under its new structure, Bidvest fields seven divisions. Of these, freight is the biggest revenue generator but services division is the biggest trading profit centre.
Freight contributed nearly a third of the turnover Bidvest earned in SA. While most of Bidvest’s operations outside SA are now housed in Bidcorp. The group retained Bidvest Namibia, which added R4.3bn turnover to the R90bn contributed by its South African operations.
“Global freight trade remained depressed, and as a consequence, volumes declined. This division’s focus in 2016 has therefore been on innovation and flexibility in an effort to contain costs and enhance efficiencies. The 3.8% decline in trading profit is considered satisfactory given the significant decline in the movement of commodities — particularly minerals — out of the country. Grain imports assisted marginally in the last quarter. The continued import of grain will be positive for this division in the new financial year,” the results statement said.
While freight contributed a third of South African turnover, it contributed a fifth of operating profit. Services was nearly the opposite, contributing 19% of South African turnover and 29% of operating profit.
Brands within the services division included BidAir, Security, Cleaning and Bidtrack, which all posted excellent results, the company said in its statement.
Bidvest’s financial services division reported the fastest turnover growth of 64% to R3.3bn while its trading profit grew 10.4% to R582m.
“Bidvest Bank improved trading profit by 30%, and the insurance company performed satisfactorily, but was impacted by the decline in the mark-to-market profits of its equity portfolio. This division posted an overall increased trading profit of 10.4%,” Bidvest says.
Its commercial products division grew turnover 42% to R5.9bn and trading profit 42% to R745m.
This division was boosted by the acquisition of Plumblink and it is in the process of acquiring Brandcorp.
“The result was slightly below my expectation — closer to indifferent than bad,” Avior Capital Markets analyst Mark Hodgson says. “The outlook should be for growth assisted by acquisitions.”
Ron Klipin, a portfolio manager at Cratos Capital, says the results were in line with expectations. “Bidvest is a different entity, having unbundled its global food division, which now has a market cap of R90bn, against Bidvest’s R51bn.”
“The sum of the parts is now greater than the original Bidvest Group, having unlocked value for shareholders. Bidvest is now a diversified industrial business, with seven entities, ranging from services to trading divisions and substantial property holdings,” he says.
“The diversification is a positive aspect, with no segments having more than a 30% contribution,” Klipin says. He said services made up 56% of trading profits, with the trading distribution division making up the rest.
Good cash flow from operations and gearing of 26% gave Bidvest plenty of scope for acquisitions, both in SA and abroad.
Meanwhile, noncore assets such as Comair, Adcock Ingram and Bidvest’s remaining share in India’s Mumbai Airport could soon be disposed of “at the right price”.
“Lazy assets, which do not contribute benchmark returns, could also be on the chopping board,” he says, adding that this would probably not include property assets — their profits contributed about R300m.
By Robert Laing with Mark Allix for Bdlive